1994 (1) TMI 244 - AT - Income Tax

Summary

Issues Involved:
1. Liability of loss of Rs. 36 lakhs worth of jewellery due to theft.
2. Disallowance of car expenses for personal usage.
3. Non-allowing of deduction for donation under section 80G.

Issue-Wise Detailed Analysis:

1. Liability of Loss of Rs. 36 Lakhs Worth of Jewellery Due to Theft:

The assessee, a firm engaged in the business of jewellery, claimed a deduction for the loss of jewellery worth Rs. 36 lakhs due to theft on February 1, 1981. The theft was reported to the police, and an inventory was taken, which showed that gold ornaments weighing 22,440.400 gms were missing. The assessee maintained registers G.S.-11 and G.S.-12 as required under the Gold (Control) Act, which were regularly checked by the concerned authorities. The assessee also announced a reward for the recovery of the stolen jewellery. The Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) (CIT(A)) disallowed the claim, stating that the police investigation was still ongoing, and the loss had not crystallized in the accounting period.

The Tribunal considered the arguments and evidence presented. The assessee argued that the loss occurred on the date of the theft and should be treated as a trading loss. The AO and CIT(A) contended that the loss could not be considered until the police concluded their investigation. The Tribunal found that the assessee maintained proper records and informed the authorities about the theft. The loss was established through the inventory and the entries in the G.S.-11 and G.S.-12 registers. The Tribunal concluded that the loss occurred on February 1, 1981, and should be allowed as a trading loss, but only to the extent of the cost price of the stolen jewellery.

2. Disallowance of Car Expenses for Personal Usage:

The ground regarding the disallowance of car expenses was not pressed by the assessee during the appeal. Consequently, this issue was dismissed by the Tribunal.

3. Non-Allowing of Deduction for Donation Under Section 80G:

The assessee claimed a deduction under section 80G for donations made. However, the CIT(A) did not provide any findings on this issue. As a result, the Tribunal concluded that this ground did not arise from the order of the CIT(A) and did not address it further.

Separate Judgments:

The Tribunal's decision included a dissenting opinion by one member, who argued that the assessee had not provided sufficient evidence to establish the loss of jewellery by theft. The dissenting member emphasized that the FIR alone was not enough and that further evidence, such as the results of the investigation in Nepal, was necessary. The case was referred to a third member, who agreed with the majority opinion that the assessee had discharged its burden of proof and that the loss should be allowed as a deduction at the cost price.

Conclusion:

The appeal was allowed in part, with the Tribunal directing the AO to allow the loss of jewellery at the cost price incurred by the assessee. The issues regarding car expenses and donations were dismissed and not addressed, respectively.